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ROBOTAXIS — A $1 TRILLION MARKET OPPORTUNITY BY 2040

Morgan Stanley (MS) said the robotaxi industry has reached a turning point, with the race shifting from proving the technology to scaling operations in a market it estimates could be worth $1 trillion globally by 2040.

The shift is driven by progress in artificial intelligence, falling hardware and training costs, broader industry participation and improvement in the regulatory environment, it said.

"From 2026, the race stops being about proving it can be done, and becomes about who can move the furthest, the fastest, and the cheapest," Morgan Stanley said in a note dated July 3.

Morgan Stanley sees the global robotaxi fleet reaching 2.5 million vehicles by 2035, with the U.S. and China accounting for the majority followed by Europe, the Middle East and ASEAN countries.

This comes at a time when competition in the autonomous-driving industry is intensifying after years of missed deadlines and inflated promises.

While MS expects Alphabet's GOOGL.O Waymo and Tesla TSLA.O to remain global leaders, it said AI-driven cost deflation is also enabling the rise of regional and category-specific players like WeRide WRD.O, Pony.ai PONY.O, Uber UBER.N and XPeng 9868.HK.

China's supply-chain deflation is another under-appreciated accelerant for the industry, Morgan Stanley said, estimating Chinese-made robotaxi solutions could cost about $35,000 to $40,000 per vehicle in 2027 before continuing to decline.

The brokerage sees the rise of robotaxis as a "structural platform shift" instead of an extension of the auto sector, with potential beneficiaries including OEMs, ride-hailing platforms, AI companies, and semiconductor firms.

However, the brokerage warned that regulatory fragmentation, safety concerns, disappointing unit economics and high capital requirements may pose risks to commercial adoption.

(Kanchana Chakravarty)

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